As consumers, we’re addicted to our phones, TikTok, and Cometeer coffee. What about on the brand side? Well, brands are addicted to discounting, namely coupon codes. Why? They convert shoppers, and consumers are used to them.
Discounts come in many forms—coupon codes, markdowns, buy-one-get-one, free shipping, free gifts with purchase—but every discount always eats into profit margin. At the end of the day, they always trade profit for revenue.
Realizing how detrimental discounts—especially coupons—can be for brands, Oren Charnoff and his team set out to create a solution for today’s ecommerce brands. So, they built Fondue, a platform that helps brands ditch discount codes and drives profitable growth with their new discount type, CashBack.
Charnoff gave us the lowdown on the CashBack opportunity for Shopify brands. Keep reading to learn how saying goodbye to coupons and hello to CashBack increases conversion and grows profits…
“Coupon codes are great for shoppers, but they hurt brands.”
Why Ditch Coupon Codes?
Coupon codes are everywhere. They’re in emails. They’re in popups. They’re in ads. They’re in influencer videos. They’re in paid ads.
And, brands are addicted to coupons. Why? They convert shoppers.
At the same time, they trade profit for revenue. “You’ll always make less net revenue when you sell with a coupon code—every single time,” says Charnoff.
The challenge is that they’re not always the main reason a brand gets a sale in the first place. Here’s an example: Let’s say a shopper sees a video from a skin-care influencer, who shares a 10% off coupon code.
That shopper might buy because:
- The shopper loves the influencer.
- The value proposition the influencer expressed is extremely compelling and resonates with the shopper.
- The shopper is a huge fan of the brand.
- The shopper loves great deals and sees a discount code.
Because the brand offers the discount code in the first place, the brand makes less net revenue and profit, even if the shopper purchased the product because of reasons 1-3 above.
Another reason discount codes hurt brand profitability is that they leak onto sites such as RetailMeNot, Honey, Rakuten, and many others.
One could argue that the shopper who goes to RetailMeNot “deserves” the coupon because they went out of their way, but it doesn’t matter since they’re already at checkout. However, it reinforces this customer behavior: consumers expect coupons every time they shop.
“The general problem is that while coupon codes are an incredible conversion tool, they’re not always why you get the conversion in the first place. But, 100% of the time they eat into your margin,” explains Charnoff.
Charnoff and his team have a more profitable price incentive than leaky coupon codes with Fondue. “If you go into a brand’s Shopify, you’ll see the discount volume to date, and it’s often about 20-30% of revenue for brands. Their jaws always drop when we show them that,” adds Charnoff. “Coupon codes should really be considered a part of CAC.”
“Coupon codes trade profit for revenue, but they’re not always why the revenue exists.”
Introducing: CashBack by Fondue
Fondue is the ultimate solution. Shoppers still get hit with the same dopamine hit from coupons; they have to do a little bit more work, but they get more money.
How does it work? Shoppers see their CashBack eligibility throughout the purchase journey. Post-purchase, they have the option to redeem CashBack in the following methods: store credit, gift cards, cash, and more to come soon.
After the purchase, the shopper receives an email where they can redeem their CashBack as cash or site credit. Brands often incentivize shoppers to select site credit by juicing up the site credit value compared to the cash option.
For shoppers who seek value, they enjoy more savings with CashBack. Some shoppers don’t redeem the cashback at all - meaning the price incentive was not key to converting in the first place. Given CashBack is more profitable than standard discounting, brands often increase the CashBack value which drives more revenue.
“Shoppers enjoy CashBack because it empowers them to choose the incentive most appealing to them.”
What is Fondue’s Value?
Brands using the platform have significantly increased conversion rates and net revenue. Robin Golf, for example, has seen a 7.8% increase in conversions and 46% lower discount costs per transaction after switching to CashBack by Fondue.
“We’ve been thrilled with the success of the Fondue CashBack product to date. The data has shown it to be more effective in driving sales, re-purchase, and customer engagement than traditional discounting,” shares Peter Marler, cofounder and CEO of Robin Golf. “As a result, we have decided to expand our use of CashBack to replace our discounting strategy entirely.”
And it’s super easy to implement. Brands simply swap out their discount codes with CashBack UTMs.
Key Use Cases
Since they’re replacing discount codes with a simple UTM link, there are so many use cases—ads, influencers, SMS campaigns, popups, and more.
Plus, brands can easily a|b test to build confidence in Fondue. Most brands, according to Charnoff, start by splitting a Cashback to standard discount in a Klaviyo and Attentive email/SMS capture and welcome series sequence.
Brands can easily measure:
- Email/SMS capture rates
- Conversion rates
- Profitability of the conversion
“We build trust with brands often through A/B tests. The transparency of the data shows how CashBack increases CVR and profit - way better than coupons site popups, welcome offers and seasonal sitewide promotions.”
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